CHAPTER 1

INTRODUCTION

INTRODUCTION TO THE TITLE

Working capital means funds required for routine operations of the company. The
interaction between current assets and current liabilities is the main theme of working
capital management rent assets refers to those assets which are converted into cash
within the time span of one year or short period. The term current liabilities refers to
those liabilities which are to be paid in the ordinary course of business current assets
management is one of the very important financial decisions to be taken by the financial
manager. The management of working capital is a challenging task and it is considered
as an integral part of the overall corporate management. The firm should maintain
sufficient level of working capital to produce up to given capacity and maximize the
return on investment in fixed assets shortage of working capital leads to lower capacity
utilization, lower turnover and hence lower profits. Working capital, in excess of the
amount required producing to full capacity; it is idle and consequently leads to decline
in profits. Hence the dictum adequacy in a virtue, surfeit is not thus working capital
management has become a basic and broad measure for judging the performance of a
business firm.
Capital required for a business can be classified under two main categories via,
1)

Fixed Capital

2)

Working Capital

Every business needs funds for two purposes for its establishment and to carry out
its day- to-day operations. Long terms funds are required to create production facilities
through purchase of fixed assets such as p & m, land, building, furniture, etc.
Investments in these assets represent that part of firms capital which is blocked on
permanent or fixed basis and is called fixed capital. Funds are also needed for short-term
purposes for the purchase of raw material, payment of wages and other day to- day
expenses etc.

These funds are known as working capital. In simple words, working capital
refers to that part of the firms capital which is required for financing short- term or
current assets such as cash, marketable securities, debtors & inventories. Funds, thus,
invested in current assts keep revolving fast and are being constantly converted in to
cash and this cash flows out again in exchange for other current assets. Hence, it is also
known as revolving or circulating capital or short term capital.

CONCEPT OF WORKING CAPITAL

There are two concepts of working capital:
1. Gross working capital
2. Net working capital
GROSS WORKING CAPITAL:
Gross working capital refers to firms investment in current assets like cash, bank
balance, inventory and receivables. It represents the commitment of funds to different
items of current assets and their relationship to turnover
The gross working capital focuses on two aspects:

Optimum investment in current assets, in order to avoid the problem arising out

of excessive and inadequate investment in current assets

The second aspect on which the gross working capital focus is the need of
arranging funds to finance current assts and the need may arise due to changes in
the level of business activity

NET WORKING CAPITAL

Net working capital refers to the difference between the current assets and current
liabilities. Net working capital can be positive or negative. Net working capital concept
is qualitative in nature while gross working capital is primarily quantitative
Current credit soundness is indicated by positive net working capital position and is
major concern to investors and bankers. It is measured by the current ratio obtained by
dividing rupee value of the current assets by the rupee value of the current liabilities
larger the ratio the more solvent the firm i.e in the event of bankruptcy, falling prices or
inflated values, the book value of current could shrink considerably and the firms
3

creditors would still be assured of payment. However, from the management point of
view , a high current ratio may indicate poor planning. Some excessive amounts of
funds are tied up in unproductive current assets.
IMPORTANCE OF WORKING CAPITAL
The need for working capital arises for day to day operations of a business. Management
of working capital is considered to be an integral part of overall finance management
because it has been realized that business failure will occur mainly due to inadequate or
mismanagement of working capital.
Inefficient working capital management may cause either inadequate excessive working
capital that is dangerous to the company. Some of the problem that may arise due to
inadequate working capital are like it may become difficult for the firm to undertake
profitable projects to non-availability of funds; fixed assets may not be efficiently
utilized due to lack of working funds, attractive credit opportunities may be lost due to
paucity of working capital. When firm is not in the position to honour its short term
obligation it may lose its reputation.
EXCESSIVE WORKING CAPITAL MAY LEAD TO THE FOLLOWING
Excess of working capital may result in unnecessary accumulation of inventories, which
may result in terms of inventory mishandling, waste and theft. Due to excessive working
capital the firm may adopt too liberal credit policy and slacken the collection of
receivables, which has an adverse effect on profits. In order to avoid the above
mentioned problems it is important to have efficient working capital management
KINDS OF WORKING CAPITAL REQUIREMENTS
The working capital requirements may be of temporary or permanent in nature:

Temporary working capital requirements:

Temporary working capital requirements refers to the extra working capital
needed to support the change in production and sales activities. It is also called
fluctuation or variable working capital
4

Depending upon the changes in production and sales the need for working
capital over and above permanent working capital, will fluctuate. For example,
extra inventory of finished goods will have to be finished goods will have to be
maintained to support the peak periods of the sales and investment in receivables
may also increase during such periods, on the other hands investment in raw

material, work in progress and finished goods will fail if the market is slack
Fixed working capital requirements:
A firm has to maintain a minimum level of current assets at all times on
economic basis. This minimum level or current assets is referred to as permanent

or fixed working capital. It is permanent in the same way as the fixed assets
FACTORS AFFECTING THE WORKING CAPITAL
The factors that affect the working capital requirement of a concern are
Nature of the business
Size of the business
Growth of the business
Manufacturing cycle
Length of the operating cycle
Production policies
Rapidity of the turnover
Business fluctuations and seasonal fluctuations
Supply conditions
Operating efficiency
Firms credit policies
Credit facilities enjoyed from the creditors
Price level changes
Profit margin and appropriation
Taxes
Market condition
Government restrictions development of transport and communication

Importance:
Every firm should have a balance working capital position. Both excessive as well as
inadequate from the firms point of view. Excessive working capital means idle funds
which earn no profit for the firm paucity of working capital not only impairs firms
profitability interruptions and inefficiencies.

The danger of excessive working capital are as follows:

Unnecessary accumulation of inventories and chances of inventory mishandling

waste. Theft and losses increase

It is an indication of defective credit policy and slack collection period.
Consequently, higher incidence of bad debts results which adversely affect

profits
Leads to managerial inefficiency
Will create a tendency of accumulate inventories and speculative profits. This
may tend to make dividend policy liberal and difficult to cope with in future
when the firm is unable to make speculative profits

Inadequate working capital is also bad with following reasons

It stagnate growth. It becomes difficult for the firm to undertake profitable projects

for non-availability of working capital funds

It become difficult to implement operating plans and achieve the firms profit target
It becomes has found difficulty to make the day to day commitments
Fixed assets are not efficiently utilized and there by affect the profitability

OBJECTIVES OF THE STUDY

A study on financial performance of MIDAS PRE-CURED PRIVATE
LIMITED is an analysis mainly based on secondary data. The study has been designed
with the following objectives:

To verify working capital requirement of the company.

To examine the solvency and to measure the efficiency and performance and

to analyze the source and uses of the funds of the company.

To analyze schedule of Changes in Working Capital.
To provide suitable suggestions based on the observations of the study for
further improvement.

LIMITATIONS OF THE STUDY

The inexperience makes the study less precise than professionals.

 In depth analysis could not be done due to time constraint.

One cannot make an accurate analysis, using the data of 5 years and judge the
performance of the whole company.
Only secondary data are used for the analysis, they were extracted for publishing
the statements of the corporation.

RESEARCH METHODOLOGY
MEANING OF RESEARCH
Research in common parlance refers to a search for knowledge. Once can also define
research as a scientific and systematic search for pertinent information on a specific
topic. Research is an art of scientific investigation. It is to systematically solve the
research problem i.e. how research is done scientifically.
The research here in this study is to analyze the balance sheet and other financial
reports of MIDAS PRE-CURED PRIVATE LIMITED to determine the management of
working capital in the company. The methodology used in the study involves the
collection of primary data as well as secondary data. Mainly data will be collected from
the annual report of the company.
Research pays Attention to.

Formulating the objectives of the study.

Collection of data.

Processing and analyzing data.

Findings and report writing

CHAPTER 2
INDUSTRY PROFILE AND
COMPANY PROFILE

INDUSTRIAL PROFILE
Rubber natural, synthetic and reclaims constitute the major and the most
important raw materials of the vital rubber industry and hold a strategic position in the
countrys economy. Rubber products are exclusively made out of natural rubber or
synthetic orany two or all three rubbers depending on the properties required to the
products. Tyres and tyre products are made out of rubber and they are manufactured by
the moulding methods.
The government of India has made considerable outlay in constructing
and maintaining roads highways and so transport plays a crucial role or the economic
development of the country. The no of vehicles playing in the road are increasing day by
day it leads to flourishing automobiles industry. Tyre industry is indispensable to the
automobile sector and the tyre consumers, they also think in terms of quality, cost,
optimum utility etc.

TYRE INDUSTRY
Ever since the invention of vehicles has taken place, mans quest to reach higher heights
started from circular stones to pneumatic tyres. All the phases reflect mans inventing
capacity. In the 19th century the tyres was invented from solid rubber tyre. Cotton
Pneumatic tyre to Nylon Pneumatic tyre to Radicalized tyre, we have grown in the last
hundred years which gives means ever upgrading his invention capacity.
The Second World War widened this scope of rubber and gave birth to the art of raw
rubber and sunk the tyre in the desert and when due to heat got vulcanized and in site for
retreading has opened up in a new tyre the area was come in to contact with the road is
called tread position. This means out due to the friction between roads and tyres. This
constitutes to 10 to 15% of the total tyre and hence with the trade wears out there is need
for the total tyre is not discarded. Giving new life for the worn out tyre by applying the
trading process now widely accepted all over the world.

Till 80s tyres was retreaded in conventional process in which after removing the parent
rubber. Rubber was applied and was heated in rigid matrices at room temperatures to
vulcanise the rubber. In this process the main advantage is that the tyre was buffed
manually. The tyre was built manually and the tyre was cured in the matrices, which is
rigid and fixed shape and tyre has to fix in to the matrices where by distortions were
taken place during the early 80s procured tyre retreading was introduced and is now
well accepted because of its various advantages. In this process the tread was initially
cured to ensure better mileage because the curing was taken place at fixed temperature
or a fixed pressure and homogeneity was obtained.

RETREADING
As the tyre moves on the road, the tread portion wears off gradually. The process of
removing the old worn out tread and replacing it with a tread surface is called
retreading. Tread rubber is the material used to replace the wearing surface on the tyre.
The old useless tyre can be made run for at most equal mileage as a new tyre by
retreading within the cost on exceeding 1/3rd of that of a new tyre. Virtually all types of
tyre can be retreaded including passenger cars, truck, motor cycle, tractor etc. Usually
tyre can be retreaded many as to 4-5 times, depending on the cased strength. In
retreading industry, commonly two methods are adopted, cold processing and hot
processing tyre of retread. The cold processing type of retreading and hot process is
known as conventional retreading.

ADVANTAGES OF RETREADING:
Retreading saves money- when a retread gets worn out the tyre wont be discarded. Like
resoling a pair of shoes, for just 1/5th of the cost of new can retread our tyre. Retreading
absolutely safe and reliable those even aircraft tyre are now retread without subjecting
the tyre to high stress was earlier.

OTHER BENEFITS
More Mileage.
More no of retread.
10

 Less possibility of punctures & Less down time.

11

COMPANY PROFILE
ABOUT MIDAS GROUP STANDARD TREADS.
Sir George Varghese, a creative thinker and industrialist, who organised the
importance of retreading well before the retreading become popular in common. He
founded the present MIDAS PRE-CURED PRIVATE LIMITED, the ladder in the
field of procured treads and conventional treads in the present scenario. Mr George
Varghese presently held the MIDAS GROUP was stared as a small tread rubber unit in
Ettumanoor industrial estate in Kottayam district, which is known as The Rubber Land
Of Kerala (Kottayam district is the highest producer of natural rubber in India). Mr
George Varghese started his small unit in1969, with an investment of Rs 65000, with his
dynamic leaderships and innovative ideas, he horned his small unit into a leader in the
field in 1985 july31st. MIDAS PRE-CURED PRIVATE LIMITED was established as
a small scale unit at Ettumanoor. It has mainly engaged in the manufacturing of procured
tread rubber. Now the company is medium scale unit.
The introduction of pre-cured trade in India made MIDAS in forefront with the
availability of best raw materials that is the natural rubber. MIDAS produce world class
rubber products such as procured rubber, camels back tread, vulcanizing cement,
cushion gum, curing bags and curing envelops, rope rubber and bonding gum etc. The
high quality control maintained effectively at every stage, makes MIDAS products
much above the lines of normal standards.
Now the company has got 36 tread rubber manufacturing units; 26 in Kerala, 8 in
Pondicherry and 2 in TamilNadu, having group turnover100crores. When considering
quality and revenue, it is the No.1 Company in this field. Indias largest rubber
computing unit belongs to MIDAS GROUP. The companys mixing capacity is 180
tonnes per day. It supplies rubber compounds to many of the Indias major tyre
companies like MIDAS TREADS (I) PVT. LTD and STANDARD TREDS
PVT.LTD, to meet their needs. The Midas Company produces 1800-2000 tonnes in the
tread rubber division per month.

12

Midas marketing and management services coordinate its marketing and

management functions, having an excellent marketing network all over India and in the
international market. The major revenue for the group is from the sale of procured tread
rubber and its market is entirely outside Kerala.

MIDAS POLYMER COMPOUND PVT.LTD

In 1977, the ministry of industry of government of India made a declaration that an
industrial undertaking in which investment in plant and machinery does not exceed
rupees 3 cores will be registered as SSI unit. Therefore the management decided to set
up a TREADS.
Treads is the wearing surface of the tyre which comes in contacts which the road
surface. It is applied in the raw state as an extruded slab of rubber compound. In cross
sections it is substantially rectangular across the centre tapering down in the very fine
edges. Chervally, ChirakkadavuPanchayath, Manimala and Kottayam district for
manufacturing rubber compounds and tyre retreading material viz.tread rubber and
allied products. The company had acquired land on least for 99 years at Chervally,
Manimala and decided to construct a factory building all infrastructure arrangements.

PHILOSOPHY OF THE COMPANY

The company believes that the only way to give customer ever improving quality and
economy is the courage to experiment with every aspect of production from inputs to
process. With the best raw materials from all over the world and quality natural rubber
close at hand MIDAS products world class rubber products.

OBJECTIVE OF THE COMPANY

Quality
Time delivery
Cost minimization
Profit maximization
Consistency in sales and service
More employment
13

SERVICES OF THE COMPANY

The main feature of MIDAS is the quality of its product. There is no compromising
regarding the quality of the product. For improving the quality of their product they
adopt latest technology and quality control systems for every production stage.

VISION & MISSION OF THE COMPANY

Increase its market share in future.

Concentrate more on its quality aspect.
To maximize the return on investment.
To remain a leading producer of retreading materials in India.
To continuously grow in business and become a significant player in world

market.
To achieve international level of excellence in technology and quality.

VALUE OF THE COMPANY

High quality products

Customer orientation
Team work among the employees
Profit for invention and innovation

14

PRODUCT PROFILE
Midas materials are made to the strictest quality standards. Formulations for all
products are developed to suite the exact requirements of the consumers. A heavy in
R&D has also given as access to the best testing equipment available for testing control
and development.

PRODUCTS OF MIDAS PVT. LTD

Camel Black (Tread Rubber)
It is also known as hot process. It is kind retreading process in which the company
makes the rubber sheet in plain form and is sold to the retreaders. It is the retreaders who
convert sheet into different shape and design with customer specifications with the help
of modules.
Heavy vehicles generally process of retreading. This process gives more mileage
compared to pre-cured treads. Under this process the retreaders themselves do buffing.
Cushion Gum
Midas manufacturers high quality cushion gum for retreading process to suit
temperature of 99 and 150c. This is associated product essential for the retreading
process
Rubber Components
Midas manufacturers custom made rubber compound master batches for a wide variety
of uses mixed to the specification in K-4MK3 intermix.

15

CHAPTER 3
REVIEW OF LITERATURE

16

REVIEW OF LITERATURE
The purpose of this chapter is to present a review of literature relating to the working
capital management. Although working capital is an important ingredient in the smooth
working of business entities, it has not attracted much attention of scholars. Whatever
studies have conducted, those have exercised profound influence on the understanding
of working capital management good number of these studies which pioneered work in
this area have been conducted abroad, following which, Indian scholars have also
conducted research studies exploring various aspects of working capital. Studies on
Working Capital Management Studies adopting a new approach towards working capital
management are reviewed here.
Sagan
In his paper (1955) perhaps the first theoretical paper on the theory of working capital
management, emphasized the need for management of working capital management.
Sagan pointed out the money managers operations were primarily in the area of cash
flows generated in the course of business transactions. However, money manager must
be familiar with what is being done with the control of inventories, receivables and
payables because all these accounts affect cash position. Thus, Sagan concentrated
mainly on cash component of working capital.
Walker
In his study (1964) made a pioneering effort to develop a theory of working capital
management by empirically testing, though partially, three propositions based on riskreturn trade-off of working capital management. Walker studied the effect of the change
in the level of working capital on the rate of return in nine industries for the year 1961
and found the relationship between the level of working capital and the rate of return to
be negative. On the basis of this observation, Walker formulated three following
propositions:

17

Proposition I If the amount of working capital is to fixed capital, the amount of risk
the firm assumes is also varied and the opportunities for gain or loss are increased.

Proposition II The type of capital (debt or equity) used to finance working capital
directly affects the amount of risk that a firm assumes as well as the opportunities for
gain or loss.
Proposition III The greater the disparity between the maturities of a firms debt
instruments and its flow of internally generated funds, the greater the risk and viceversa. Thus, Walker tried to build-up a theory of working capital management by
developing three prepositions.
Weston and Brigham (1972)
They suggested that short-term debt should be used in place of long-term debt whenever
their use would lower the average cost of capital to the firm. They suggested that a
business would hold short-term marketable securities only if there were excess funds
after meeting short-term debt obligations. They further suggested that current assets
holding should be expanded to the point where marginal returns on increase in these
assets would just equal the cost of capital required to finance such increases.
Welter
In his study (1970)5, stated that working capital originated because of the global delay
between the moment expenditure for purchase of raw material was made and the
moment when payment were received for the sale of finished product. . Delay centers
are located throughout the production and marketing functions. The study requires
specifying the delay centers and working capital tied up in each delay centre with the
help of information regarding average delay and added value.
Lambrix and Singhvi (1979)

18

They adopting the working capital cycle approach to the working capital management,
also suggested that investment in working capital could be optimized and cash flows
could be improved by reducing the time frame of the physical flow from receipt of raw
material to shipment of finished goods, i.e. inventory management, and by improving
the terms on which firm sells goods as well as receipt of cash.

Abramovitz (1950) and Modigliani (1957)

They highlighted the impact of capacity utilization on inventory investment. Existing
stock of inventories is expected to take account of adjustment process to the desired
levels. Thus the variable, existing stock of inventories, is postulated to be negatively
related with the desired stock. The ratio of inventory to sales may affect inventory
investment positively because a high ratio of stocks to sales in the past suggests the
maintenance of high levels of inventories in the past and thus also calling for high
investment in inventories in the current period.
Warren and Shelton (1971)

applied financial simulation to simulate future financial statements of a firm, based on a

set of simultaneous equations. Financial simulation approach makes it possible to
incorporate both the uncertainty of the future and the many interrelationships between
current assets, current liabilities and other balance sheet accounts.
Metzler (1941) and Hilton (1976)

The inventory-sales ratio, to be statistically significant. Fixed investment is generally

expected to affect inventory investment inversely because of competing demand for the
limited funds. However, in case of an expanding firm, the two components may be
complementary. Besides, availability of funds from retained earnings and external
sources, may affect investment decision by providing funds for financing inventory
investment. Therefore, retained earnings flow of debt are postulated to have positive
coefficients.

19

FILBECK and KRUEGER (2005)

It is the difference between resources in cash or readily convertible into cash (Current
Assets) and organizational commitments for which cash soon will be required (Current
Liabilities).

DEFINITION

The Advanced Learners Dictionary of Current English lays down the meaning of
research as a careful investigation or inquiry especially through search for new facts
in any branch of knowledge. Redman and Morey define research as a systematized
effort to gain new knowledge.

RESEARCH DESIGN
The research design adopted for the study is descriptive in nature. The study
describes the structure, size and working capital, length of operating cycle and
also analyses the efficiency with which working capital has been managed.

DATA COLLECTION
The methodology used in the study involves the collection of primary data as
well as secondary data. Majority of the data was collected with the help of the annual
reports provided by the company. Data plays a very vital role in any research
programme. Source of data are of mainly two types i.e., Primary and Secondary. This
study is mainly based on secondary data. The important sources of secondary data are
books, journals, web sites, published annual reports and magazines of relevant periods
of the company.

SOURCE OF DATA
20

Primary data : Discussion were held with different department managers and
officers of the company to get general information about the company and its
activities.

Secondary data: Secondary data were obtained from the internal records of the
company i.e., from the published annual reports, website of the company, journals
and magazines and also other books related to the analysis of financial
performance.

RATIO ANALYSIS
Ratio analysis is a technique of the calculation of a number of accounting ratios from the
data or figures found in the financial statements, here comparision of the accounting ratio
with those of the previous years or with those of other concern engaged in similar line of
activities or with those of standard or ideal ratios, and the interpretation of the
comparison.
In short, it is the technique of interpretation of the financial statement with the help of the
accounting ratios derived from the financial statements

ADVANTAGE OF RATIO ANALYSIS

Ratio analysis simplifies the understanding of financial statements

Accounting ratios establish the inter relationship between the various financial

figures
Ratios tells the whole story of the changes in the financial condition or position of

the business
Ratio analysis is an invaluable aid to the management in the efficient discharge of

its basic functions of forecasting, planning, communication, control etc.

Ratio analysis facilitates inter firm comparision

21

Ratios are very helpful in establishing standards costing system and budgetary

control
It serves as an instrument for testing management efficiency.

22

CHAPTER 4
DATA ANALYSIS AND
INTERPRETATION

23

DATA ANALYSIS AND INTERPRETATION

Data Analysis and Interpretation are closely related. Interpretation is not
possible without analysis and without interpretation, analysis has no value. Various
account balances appear in the Financial Statements. These account balances do not
represent homogeneous data so it is difficult to interpret them and draw some
conclusions. This requires and analysis of the data in financial statements so as to bring
some homogeneity to the figures shown in the financial statements. Interpretation is thus
drawing of inference and stating what the figures in the Financial Statements really
mean. Interpretation is dependent on interpreter himself. Interpreter must have
experience, understanding and intelligence to draw correct conclusions from the
analyzed data.
The analysis and interpretation of Financial Statements are an attempt to determine the
significance and meaning of the Financial Statements data so that a forecast may be
made of the prospects for the future earnings, ability to pay interest and debt maturities
and profitability of sound dividend policy. The most important objective of the analysis
and interpretation of Financial Statements data to know the strength and weakness of a
business undertaking so that a forecast may be made of the future prospects of that
business undertaking.

1 CURRENT RATIO:
Current ratio is the most common ratio for measuring liquidity. It represents
the ratio of current assets to current liabilities. It is also called working capital ratio. It is
calculated by dividing current assets by current liabilities.
the current ratio is also known as the working capital ratio and is normally presented as
a real ratio. Standard ratio is 1:2
Expression of current ratio
Current Ratio =

Current Assets
Current Liabilities
24

Table No. 1 : Table showing Current Ratio

YEAR

CURRENT

CURRENT

CURRENT

ASSESTS(in lakhs)

LIABILITIES(in lakhs)

RATIO(in times)

2009-2010

4909.16

2078.86

2.36

2010-2011

4911.01

1923.28

2.55

2011-2012

5223.74

1168

4.47

2012-2013

5881.43

1265.78

4.64

2013-2014

6606.98

1183.09

5.58

25

Chart No. 1 : Chart showing Current Ratio

current ratio
6
5
4
current ratio
3
2
1
0
2009-10

2010-11

2011-12

2012-13

2013-14

Interpretation:
The current ratio of firm measures its short-term solvency i.e., its ability to
meet short-term obligations. In a sound business, a current ratio of 2:1 is
considered as an ideal one. If we look into the current ratio of Travancore
chemicals and sugar ltd the current ratio has gone from 4.64 to 5.58 i.e that
means that for every one rupee of current liability it has 5.58 current assets..it
is in a good position to pay its short term liabilities quickly

26

2 NET PROFIT RATIO

This ratio is calculated to know the actual a profit arising out of total sales.

Net profit ratio =

Net Profit

*100

Net Sales
Table No .2: Table showing Net Profit Ratio

Year

Net Profit

Net sales

Net Profit Ratio

(in %)

2009-2010

93.63

4670.67

2.00

2010-2011

63.11

4308.86

1.46

2011-2012

103.42

3103.22

3.33

2012-2013

132.40

5271.29

2.51

2013-2014

140.97

4327.59

3.26

27

Chart No. 2: Chart showing Net Profit Ratio

3.5
3
2.5
2
Column2

1.5
1
0.5
0
2009-10

2010-11

2011-12

2012-13

2013-14

Interpretation
This Ratio tells out of total sales what profit it earned is. It has gone up from 2% in
2009-10 to 3.26 in 2013-14. However , the margin has fluctuated between these
years.
28

3 GROSS PROFIT RATIO

The gross profit ratio plays an important role in two management areas. In the
area of financial management, the ratio serves as a valuable indicator of the firms ability
to utilize effectively outside sources of fund. Secondly, this ratio also serves as
important tool in shaping the pricing policy of the firm. This ratio expresses the
relationship between gross profit and sales. This ratio is calculated by dividing gross
profit by net sales.
Gross Profit Ratio = Gross Profit/Net Sales

Table No .3 : Table showing Gross Profit Ratio

YEAR

GROSS PROFIT

NET SALES

GROSS PROFIT
RATIO

29

2009-2010

120.13

4670.67

2010-2011

183.22

4308.86

2011-2012

286.64

3103.22

2012-2013

419.04

5271.29

0.079

2013-2014

560.01

4327.59

0.129

Chart No.3 : Chart showing Gross Profit Ratio

30

0.025

0.043
0.092

0.14
0.12
0.1
0.08
Series 3

0.06
0.04
0.02
0
2009-10

2010-11

2011-12

2012-13

2013-14

Interpretation
In 2009-10, The ratio is 0.025 Gross profit shows an increasing trend but it declined in
2012-13 as the expenditure was high when compare to other years. So they should
maintain this level of activity

31

4 RETURN ON TOTAL ASSETS

Profitability can be measured in terms of relationship between net profit and
total asset. This ratio is also known as return on gross capital employed. It measures
the profitability of investment. The overall profitability can be known by applying this
ratio.

Return on total assets =

Net Profit

* 100

Total Asset
Table No .4 : Table showing Return On Total Asset

YEAR

NET PROFIT

TOTAL ASSETS

RETURN ON
TOTAL ASSETS

2009-2010

93.63

5701.52

2010-2011

63.11

5615.82

1.12

2011-2012

103.42

5883.47

1.76

2012-2013

132.40

2013-2014

140.97

6453.02
7130.00

32

1.64

2.05
1.98

Chart No.4 : Chart showing Return On Total Asset

2.5

1.5
Series 2
1

0.5

0
2009-10

2010-11

2011-12

2012-13

2013-14

Interpretation
The ratio has gone up from 1.64 in 2009-10 to 1.98 in 2011-12. The company has
declined in 2010-11 and shown increase in return to asset as the Working Capital
Management has been given more attention.

33

5 NET WORKING CAPITAL TO CAPITAL EMPLOYED RATIO

(NWCCE)

NWCCE = net working capital

capital employed

The ratio is used as a measure for a proportion of working capital in total capital
employed.

Net working capital = current asset current liabilities

Capital employed = net worth + debt
Net worth = paid up capital + reserves and surplus intangible assets
Debt = long term debt

Table No .5 : Table showing Net Working Capital to Capital Employed Ratio

Year

NWC

capital

NWCCE ratio

employed
2009-2010

2830.30

5701.52

0.49

2010-2011

2987.73

5615.82

0.53

2011-2012

4055.74

5853.47

0.69

2012-2013

4527.84

6453.02

0.70

2013-2014

5423.89

7130.00

0.76

34

Chart No. 5 : Chart showing Net Working Capital to Capital Employed

Ratio
0.8
0.7
0.6
0.5
0.4

Series 3

0.3
0.2
0.1
0
2009-10

2010-11

2011-12

2012-13

2013-14

Interpretation
The ratio tells us that the net working capital as a proportion of capital
employed. Here we can see that Travancore sugars and chemical ltd has a
proportion of networking capital in the range of around 27% in the last 5
years.

35

6 CURRENT ASSET TURNOVER RATIO

Current assets turnover ratio is the ratio between current assets and turnover or sale.
Assets are used to generate sales. This ratio helps to know how the company uses its
assets to increase sales.

Current asset turnover ratio= net sales

current assets

Table No. 6 : Table showing Current Asset Turnover Ratio

Year

Net sales

Current asset

CATR

2009-2010

4670.67

4909.16

0.95

2010-2011

4308.86

4911.01

0.87

2011-2012

3103.22

5223.71

0.52

2012-2013

5271.29

5881.43

0.89

2013-2014

4327.59

6606.98

0.65

36

Chart No. 6: Chart showing Current Asset Turnover Ratio

1
0.9
0.8
0.7
0.6
0.5

Series 2

0.4
0.3
0.2
0.1
0
2009-10

2010-11

2011-12

2012-13

2013-14

Interpretation
This ratio is found in order to know the relationship between the current assets used
in order to increase sales. CATR ratio has been showing variations in the past 5
years. In the years 2014 it declined to 0.65 from 0.89. this indicates that the
efficiency efficiency of working capital management is on the decline.

37

7 NET WORKING CAPITAL TURNOVER

RATIO(NWCTR)
NWCTR is the ratio between working capital and turnover and sales

NWCTR =

workng capital/ Sales

Net sales = total sales sales return

Net working capital = current asset current liabilities
This ratio tells us that the relationship between net sales and net working
Capital.
Table No. 7 : Table Showing Net Working Capital Turnover Ratio

Year

NWC

Sales

NWCTR

2009-2010

2830.30

4670.67

0.61

2010-2011

2987.73

4308.86

0.69

2011-2012

4055.74

3103.22

1.31

2012-2013

4527.84

5271.29

0.86

2013-2014

5423.89

4327.59

1.25

38

Chart No.7: Chart showing Net Working Capital Turnover Ratio

1.4
1.2
1
0.8
Series 2

0.6
0.4
0.2
0
2009-10

2010-11

2011-12

2012-13

2013-14

Interpretation
This ratio tells us the relationship between net sales and net working capital.
The Ratio has been fluctuating due to changes in net working capital.

39

TABLE NO: 8

TABLE SHOWING STATEMENT OF CHANGES IN WORKING

CAPITAL
(Rs in cores)
Year

A.CURRENT

2010

4909.16

2011

4911.01

Increase in

Decrease in

working

working capital

capital
1.85

NIL

ASSETS

B. TOTAL

4909.1

C.CURRENT

4911.01

1.85

109.51

NIL

LIABILITY
Provision

1852.2

1742.7

D TOTAL

NIL
46.07

E Working Capital
226.58

180.51

40

(B-D)

2078.8

1923.2

Net decrease in

155.58

Working capital

NIL
2830.3
0

2987.7
3

157.43

2987.7
3

2987.7
3
TABLE NO: 9

TABLE SHOWING STATEMENT OF CHANGES IN WORKING

CAPITAL
( Rs in cores)
Year

A.CURRENT ASSETS

2011

4911.01

2012

Increase in

Decrease in

working

working

5223.74

capital
312.73

5223.7

312.73

capital
NIL

B. TOTAL
4911.01
C.CURRENT LIABILITY

41

NIL

Provision
D TOTAL

1742.7

1003.5

E Working Capital (B-D)

739.50

16.01
Net decrease in Working

180.51

164.50

1923.2

1168

capital
755.28

8
2987.7
3

NIL

4055.7
4

1068.0
1

4055.7
4

4055.7

4
TABLE NO: 10

TABLE SHOWING STATEMENT OF CHANGES IN WORKING

CAPITAL
(Rs in cores)
Year

A.CURRENT ASSETS

2012

5223.74

2013

5881.43

Increase in

Decrease in

working

working

capital
657.69

capital
NIL

B. TOTAL
5223.74

5881.43

42

657.69

NIL

C.CURRENT LIABILITY

1003.50

1265.78

NIL

Provision
D TOTAL
E Working Capital (B-D)

262.28
164.50
1168

87.81
1353.59

76.69
76.69

Net decrease in Working

capital

262.28
4055.74
4527.84

472.10
4527.84

4527.84

TABLE NO: 11

TABLE SHOWING STATEMENT OF CHANGES IN WORKING

CAPITAL
Rs. in Crores
Year

A.CURRENT ASSETS

2013

5881.43

2014

6606.98

Increase in

Decrease

working

in working

capital
725.55

capital
NIL

B. TOTAL

C.CURRENT LIABILITY
Provision
D TOTAL

5881.43

6606.98

725.55

1265.78

1081.32

184.46

NIL

NIL
87.81

101.77
13.96
43

E Working Capital (B-D)

1353.59

1183.09

184.46

Net decrease in Working

capital

13.96
4527.84

5423.89

896.05

2.70

2.70

CHAPTER 4
FINDINGS, SUGGESTIONS AND
CONCLUSION
44

45

FINDINGS
The current ratio of the MIDAS PRE-CURED PRIVATE LIMITED has gone
up from 4.64 in 2012-13 to 5.58 in 2013-14. This tells us that the company is
a good position to pay back its liability quickly.
This Ratio tells out of total sales what profit it earned is. It has gone up from 2%
in 2009-10 to 3.26 in 2013-14. However, the margin has fluctuated between
these years.
In 2009-10, The ratio is 0.025 Gross profit shows an increasing trend but it
declined in 2012-13 as the expenditure was high when compare to other years.
So they should maintain this level of activity
The ratio has gone up from 1.64 in 2009-10 to 1.98 in 2013-14. The company
has declined in 2010-11 and shown increase in return to asset as the Working
Capital Management has been given more attention.
The ratio tells us that the net working capital as a proportion of capital
employed. Here we can see that Travancore sugars and chemical ltd has a
proportion of networking capital in the range of around 27% in the last 5
years.
This ratio is found in order to know the relationship between the current assets
used in order to increase sales. CATR ratio has been showing variations in
the past 5 years. In the years 2014 it declined to 0.65 from 0.89. this
indicates that the efficiency efficiency of working capital management is on
the decline.
This ratio tells us the relationship between net sales and net working capital.
The Ratio has been fluctuating due to changes in net working capital.

46

SUGGESTIONS
To reduce the excess requirement of working capital the following suggestions
are made
Not to maintain the idle cash
Adequate steps are taken for reducing the balance of debtors.
In order to increase cash sales proper discount policies are followed by the
firm.
Factoring service is used for collecting amount from debtors.
Collection from debtors is increased, that should be used for settle the current
obligation.
Idle cash is also used for settle the current obligation.

47

CONCLUSION
Based up on the study of my MBA program I have conducted a study on working capital
of MIDAS PRE-CURED PRIVATE LIMITED , I have learnt many things about the
Concern. I am glad to give suggestion to the concern on the problem raised on my study.
Based up on the study I found that the financial position of the concern satisfactory and
it has all possibilities to expand their activities in the near Future.

48

BIBLIOGRAPHY

49

BIBLIOGRAPHY

REFERENCE BOOKS

1. Research Methodology & Technique, 2nd edition.

Kotharic C.R
2. Production & Operation Management, 5th edition.
Evertte E Adam & Ronald J Ebert.
3. Marketing Management, 10th edition.
Philip Kotler
4. Finance Management, 2nd edition.
SubirKumarBanarjee.

JOURNALS & MAGAZINE

1. Company Magazines.
2. Annual Report.

50

APPENDIX

51

ANNEXURE
PROFIT AND LOSS ACCOUNT FROM 2010 - 2014
MIDAS PRE-CURED PRIVATE LIMITED ,
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED31ST MARCH,
2010
Rs in 0000

52

INCOME

AMOUNT

Income from Sales

4430.00

Stock Adjustment

272.43

Other Income

116.62

Less : Selling Expense

148.38

TOTAL

4670.67

EXPENDITURE

AMOUNT

Raw Material Consumed

2929.49

Fuel

155.02

Stores and Spares

1.09

Salary and Wages

603.64

Welfare Expenses

83.91

Repairs

61.35

Other Factory Expenses

353.66

TOTAL

4188.16

Profit before interest, depreciation & income tax

482.51

Less : Interest and Tax

267.04

Depreciation

121.84

53

Extra Ordinary Item

NET PROFIT BEFORE INTEREST AND DEPRECIATION

0.00

93.63

MIDAS PRE-CURED PRIVATE LIMITED PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED31ST MARCH, 2011
Rs in 0000

54

INCOME

AMOUNT

Income from Sales

3874.00
Stock Adjustment
299.78
Other Income
222.77
Less : Selling Expense
87.69
TOTAL
4308.86
EXPENDITURE

AMOUNT

Raw Material Consumed

2520.80
Fuel
117.57
Stores and Spares
1.91
Salary and Wages
787.08
Welfare Expenses
75.03
Repairs
70.16
Other Factory Expenses
348.43
TOTAL
3920.98
Profit before interest, depreciation & income tax
387.88
Less : Interest and Tax
233.91
Depreciation
55

Extra Ordinary Item

NET PROFIT BEFORE INTEREST AND DEPRECIATION

90.86
0.00

63.11

MIDAS PRE-CURED PRIVATE LIMITED , PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED31ST MARCH, 2012
Rs in 0000

56

INCOME

AMOUNT

Income from Sales

3364.00
Stock Adjustment
210.27
Other Income
48.20
Less : Selling Expense
519.25
TOTAL
3103.22
EXPENDITURE

AMOUNT

Raw Material Consumed

1685.51
Fuel
106.56
Stores and Spares
0.51
Salary and Wages
573.79
Welfare Expenses
69.12
Repairs
17.07
Other Factory Expenses
213.83
TOTAL

2666.39

Profit before interest, depreciation & income tax

436.83

Less : Interest and Tax

258.3
Depreciation
57

Extra Ordinary Item

NET PROFIT BEFORE INTEREST AND DEPRECIATION

75.11
0.00

103.42

MIDAS PRE-CURED PRIVATE LIMITED ,

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED31ST MARCH,
2013
Rs in 0000

58

INCOME

AMOUNT

Income from Sales

5044.00
Stock Adjustment
220.49
Other Income
115.51
Less : Selling Expense
108.71
TOTAL
5271.29
EXPENDITURE

AMOUNT

Raw Material Consumed

3530.13
Fuel
154.81
Stores and Spares
1.41
Salary and Wages
580.29
Welfare Expenses
54.17
Repairs
25.88
Other Factory Expenses
353.20
TOTAL
4699.89
Profit before interest, depreciation & income tax
571.40
Less : Interest and Tax
367.00
Depreciation
59

Extra Ordinary Item

NET PROFIT BEFORE INTEREST AND DEPRECIATION

72.00
0.00

132.40

MIDAS PRE-CURED PRIVATE LIMITED ,

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED31ST MARCH, 2014
Rs in 0000

60

INCOME

AMOUNT

Income from Sales

4484.00
Stock Adjustment
157.00
Other Income
64.87
Less : Selling Expense
378.28
TOTAL
4327.59
EXPENDITURE

AMOUNT

Raw Material Consumed

2636.67
Fuel
91.80
Stores and Spares
3.33
Salary and Wages
638.63
Welfare Expenses
57.30
Repairs
17.28
Other Factory Expenses
268.59
TOTAL
3713.60
Profit before interest, depreciation & income tax
613.99
Less : Interest and Tax
416.96
Depreciation
61

Extra Ordinary Item

NET PROFIT BEFORE INTEREST AND DEPRECIATION

56.06
0.00

140.97

BALANCE SHEET (FROM2010 2014)

MIDAS PRE-CURED PRIVATE LIMITED ,
BALANCE SHEET AS ON 31ST MARCH, 2010
Rs in 0000

62

LIABILITIES AT THE END OF THE YEAR

AMOUNT

A. SHARE HOLDERS FUND:

Share Capital
1301.81
Reserves and Surplus
398.04
Profit and Loss Account

120.13

B. BORROWINGS:

Short-Term

397.68

Long-Term

1405.00

C. CURRENT LIABILITIES AND PROVISIONS:

Current Liability

1852.28

Provisions

226.58

TOTAL

5701.52

ASSETS AT THE END OF THE YEAR

AMOUNT

A. FIXED ASSETS:

Fixed Assets less Depreciation

791.86

B. INVESTMENTS:

Investments

0.02

C. CURRENT ASSETS, LOANS AND ADVANCES:

Current Assets
63

Loans and Advances

TOTAL

4909.16

0.48

5701.52

MIDAS PRE-CURED PRIVATE LIMITED ,

BALANCE SHEET AS ON 31ST MARCH, 2011
Rs in 0000

64

LIABILITIES AT THE END OF THE YEAR

AMOUNT

A. SHARE HOLDERS FUND:

Share Capital
1301.81
Reserves and Surplus
398.04
Profit and Loss Account

183.22

B. BORROWINGS:

Short-Term

240.79

Long-Term

1568.68

C. CURRENT LIABILITIES AND PROVISIONS:

Current Liability

1742.77

Provisions

180.51

TOTAL

5615.82

ASSETS AT THE END OF THE YEAR

AMOUNT

A. FIXED ASSETS:

Fixed Assets less Depreciation

704.71

B. INVESTMENTS:

Investments

0.02

C. CURRENT ASSETS, LOANS AND ADVANCES:

Current Assets
65

Loans and Advances

TOTAL

4911.09

0.00

5615.82

MIDAS PRE-CURED PRIVATE LIMITED ,

BALANCE SHEET AS ON 31ST MARCH, 2012
Rs in 0000

66

LIABILITIES AT THE END OF THE YEAR

AMOUNT

A. SHARE HOLDERS FUND:

Share Capital
2369.68
Reserves and Surplus
171.54
Profit and Loss Account

286.64

B. BORROWINGS:

Short-Term

537.09

Long-Term

1320.52

C. CURRENT LIABILITIES AND PROVISIONS:

Current Liability

1003.50

Provisions

164.50

TOTAL

5853.47

ASSETS AT THE END OF THE YEAR

AMOUNT

A. FIXED ASSETS:

Fixed Assets less Depreciation

629.71

B. INVESTMENTS:

Investments

0.02

C. CURRENT ASSETS, LOANS AND ADVANCES:

Current Assets
67

Loans and Advances

TOTAL

5223.74

0.00

5853.47

TRAVANCORE SUGAR FACTORY, BALANCE SHEET AS ON 31ST

MARCH, 2013
Rs in 0000

68

LIABILITIES AT THE END OF THE YEAR

AMOUNT

A. SHARE HOLDERS FUND:

Share Capital
2369.68
Reserves and Surplus
15.00
Profit and Loss Account

419.04

B. BORROWINGS:

Short-Term

806.25

Long-Term

1489.46

C. CURRENT LIABILITIES AND PROVISIONS:

Current Liability

1265.78

Provisions

87.81

TOTAL

6453.02

ASSETS AT THE END OF THE YEAR

AMOUNT

A. FIXED ASSETS:

Fixed Assets less Depreciation

571.57

B. INVESTMENTS:

Investments

0.02

C. CURRENT ASSETS, LOANS AND ADVANCES:

Current Assets
69

Loans and Advances

TOTAL

5881.43

0.00

6453.02

MIDAS PRE-CURED PRIVATE LIMITED BALANCE SHEET AS ON 31ST

MARCH, 2014
Rs in 0000

70

LIABILITIES AT THE END OF THE YEAR

AMOUNT

A. SHARE HOLDERS FUND:

Share Capital
2369.68
Reserves and Surplus
15.00
Profit and Loss Account

560.01

B. BORROWINGS:

Short-Term

726.11

Long-Term

2276.11

C. CURRENT LIABILITIES AND PROVISIONS:

Current Liability

1081.32

Provisions

101.77

TOTAL

7130.00

ASSETS AT THE END OF THE YEAR

AMOUNT

A. FIXED ASSETS:

Fixed Assets less Depreciation

522.59

B. INVESTMENTS:

Investments

0.02

C. CURRENT ASSETS, LOANS AND ADVANCES:

Current Assets
71

Loans and Advances

TOTAL

6606.98

0.41

7130.00